March 5, 2007

Are Employees Really Assets In Organizations?

So much has been said lately about the importance of people in organizations and of what people can do for organizations. There are also leaders outside of business who have emphasized why people form the backbone of national development. The best organizations are made of the best people. The organization’s long term goals and successes are conceived by its people, and the very culture and continuity of the organization are designed for people to enjoy their work and produce their best. All these are true.

Have we not been told that money is the most important resource of the organization, or that state-of-art technology will deliver excellent products and these products should then take care of things for the organization? So why is it that all of a sudden management experts have proclaimed that people in organizations form the vital resource which organizations must attract, nurture and retain? Are not people an appendage of the production process: the extension of mechanical levers and have become the human timers for electrical switches who merely turn things on and off at precise time-schedules? Were we not once making use of people like extensions of machines when our economy was less developed in the 70s? Even as the economy grew more sophisticated now, the manufacturing sector, principally, still employs people as mindless workers (often the service sector is also guilty of the same).

To a great extent, this seems to be the way of things in manufacturing, even though it may not be a preferred choice, and will continue to do so as long as the industry remains duplicative in nature. In crossing over into innovative manufacturing, employees will have to be hired for their brains. The product improvement and control over quality will have to originate from the assembly line itself. The company that makes mouse traps can no longer make those same mouse traps that once sold, it will now have to make smart mouse traps through clever ideas. Value will be added to the product. It will be extremely versatile, more user-friendly, more powerful, and frighteningly so, a lot cheaper. The last has been thought inconceivable by many entrepreneurs and certainly that runs against the grain of business logic. But entrepreneurs will be forced to rethink whether escalating costs are results of inefficiency or true value. This is not some airy-fairy stuff. Look at the video-cassette recorder and again, the personal computer. These are essentially the hardware that got produced because of the software of quality and knowledge employees in the companies.

We have now entered a stage where we have to employ people who are going to contribute at work with their brain-power. In the past, companies want to hire people with brains but may not necessarily want them to use their brains. Allowing them to use their brains too much and too often would cause too much disturbance and conflict and managers are not equipped to manage such a paradox. The culture of many companies also prefer compliance with rules over innovative work solutions. Employees are simply required to follow procedures. When the authorities wanted to implement the use of the third brake on motor vehicles some time ago, the government department that was entrusted to operationalize this policy could think of nothing useful but write a silly set of rules requiring the light to be of a certain dimension and placed a number of centimetres here and there. All that was very neat on paper but was nonsensical in practice. Ministerial intervention finally resolved the issue.

Needless to say, a number of bureaucratic organizations today, be they in the public or private sector, still demand this blind faithfulness of their employees to follow archaic rules, no matter what. Perhaps this came about because of the overacceptance of Fayol’s concept of what the management process should be. Control is essential and is the finality, and that used to be conventional management wisdom (or is it still is?). But excessive control in many organizations- the kind that we often encounter- is counter-productive and in substance acknowledges the organization’s failure in hiring capable people. When this happens, you want to trust your rules better than your people. Centralized authority constricts the organization’s ability to respond effectively to change. But decentralizing authority is not equated with evaporating authority as many feared. Still, the better you are able to follow rules in bureaucratic environment, the better you are thought to be and hence will be appraised according to that anachronistic perception by your superiors.

One of the best ways to enable the organization to get the right sort of people and become competitive lies in the recruitment and selection process. Do that right and you will get the right sort of people. Get the right people first is better than getting your people right. The alternative which is often tried may lie with fixing the system by whatever jargon you want to call it. Hence reinventing the performance appraisal system in the hope of bettering the quality of the organization’s product(s) should be a low priority thing. Where there is overcentralization of employee hiring for all departments, decentralizing hiring which would be more appropriate at addressing human resource specifics would be a better choice in lifting product quality.

The criteria for recruitment and selection of new hirees will have to be refocused and departure from overused ideas of the usual numbers of years of experience (really, very quantitative), reward orientation and past performance is inevitable. This is because the old set of criteria focuses on the person’s past and the short term needs. Organizations will have to embrace a radically new set of criteria centred around employee learning, potential and motivation. When that is done, employees will now be hired and considered as soft assets in the company and it is these soft assets that will manage and optimize the use the hard assets of the company to good effect. Down the road, the traditional accounting system which was designed to cater to the second wave will have to be rewritten to show what kind of assets the organization truly has in the balance sheet in the third wave.

Alex Yong is a HR consultant and author. He is author of MALAYSIAN HUMAN RESOURCE MANAGEMENT that was published by the Malaysian Institute of Management. That book has gone through three reprints and the new revised edition will soon be launched. He is also author of the best selling strategic HR book titled STRATEGIC HR: INVENT AND INNOVATE. Prior to this, he was director of human resource in Ernst & Young, Malaysia. He was also an external resource person for the Malaysian Institute of Management (MIM) and have lectured and done training for MIM for many years.

Alex Yong has over 35 years of work experience in both the private and public sectors. He graduated from Curtin University of Technology, Western Australia. He can be contacted at ay-hrm@yahho.com